Donald H. Wilson's last banking job involved hunting for capital. Now, he is set to become the chairman of another bank that was able to find outside investors.
Community Financial Shares (CFIS) in Glen Ellyn, Ill., said on Tuesday that it had reached agreements with 63 investors led by New York private-equity firm Clinton Group to secure a $24 million investment. The $334 million-asset company will also extend a rights offering to existing shareholders that could bring in another $3 million.
Wilson will join the company as part of the agreement with the new shareholders, succeeding Donald H. Fischer, who will retire once the outside investment has closed. Wilson said in an interview that he was limited in what he could say about the deal given the impending offering, though he was able to provide some perspective.
"The investors are viewing the attractiveness of the metropolitan Chicago market and there are some banks, in our case this bank, where things have stabilized enough that it makes sense to come in," Wilson said.
"It's an ongoing process," he said of scouting investment opportunities. "I've been very, very selective. There are still a lot of banks anxious for capital, but it involves a lot of time and effort. … Often you decide it is not viable, but every once in a while you find one that meets your criteria."
Investors were attracted to Community Financial because of apparent stabilization of its troubled loans, which fell 35% from a year earlier, to $8.8 million at Sept. 30, and its branch network, Wilson said. "Even though it only has four branches, it has good branch density," he said. "It is extremely good at attracting deposits."
The company's bank was the third-largest deposit holder in Wheaton and Glen Ellyn, the two cities it serves, with a 9.4% market share, according to data from the Federal Deposit Insurance Corp.
The new position offers a bit of redemption for Wilson. In early 2006, he joined Amcore Financial in Rockford, Ill., as its chief financial officer, leaving behind a decade at Marshall & Ilsley in Milwaukee. Roughly a year and a half later, he became Amcore's president and chief operating officer and was largely viewed as being groomed to eventually take over the company's reins.
The economic downturn began taking on toll on Amcore, and Kenneth E. Edge, the company's longtime chief executive, abruptly retired in early 2008. The board named William R. McManaman, a longtime director, to succeed Edge.
Wilson led a charge to keep the bank above water, but he was laid off in April 2009, along with 115 other employees, as Amcore looked to slash expenses. Analysts blasted the company for letting Wilson go. The $5 billion-asset bank failed a year later.
Wilson said he doesn't believe Amcore's failure will stand in the way of his new position at Community Financial, which will need to be approved by regulators.
Since leaving Amcore, Wilson has been advising community banks and private-equity groups as the chairman and chief executive of Stone Pillar Advisors. He has also been looking for an opportunity to get back into banking.
The capital infusion, which is expected to close before Dec. 31, comes at an opportune time for Community Financial. Its bank was significantly undercapitalized at Sept. 30, with a leverage ratio of 2.9%.
The company also owes an unnamed bank $1.3 million for an outstanding loan. Although Community Financial is out compliance with the loan, the lender has agreed to accept $900,000 to pay off the debt. The company also has almost $7 million in preferred stock from the Treasury Department's Troubled Asset Relief Program.
Pending regulatory approval of the deal, the Treasury has agreed to accept $3.29 million and 45% of the company's $665,000 in accrued dividends.
Not all the capital is going toward fixing the company's woes. Once its house is in order, Community Financial would like to be a consolidator. "This private placement … will not only permit us to satisfy the capital requirements of our regulatory order, but will provide the company and the bank with capital to take advantage of growth opportunities," Scott W. Hamer, Community Financial's president and chief executive, said in a press release. Hamer did not return a call for comment.
There are 28 struggling banks in the Chicago area, which is home to 185 institutions at June 30, according to data from BankDataworks.com.